Class Action Lawsuits – Punishing Defective Product Manufacturers

Nov 23, 2017 |

By Louis Rumao:

The class of alleged victims — the clients of the suing law firm — is often a secondary concern, and is usually left with relatively little financial benefit, sometimes merely a few cents or a discount coupon, while the lawyers get the lion’s share of the spoils

In the United States, manufacturers of consumer goods have a lot to fear not only from the government, but increasingly of becoming the target of a class action lawsuit. Most major corporations (read deep pockets), and many smaller ones are subject to class action litigation. One can access www.classaction.org website to peruse the list of thousands of lawsuits currently grinding through the US court system, and hundreds are being planned, just awaiting a cause and a place-holder “victim” as a lead plaintiff.
A class action lawsuit is when one (or sometimes a few people) files a single lawsuit on behalf of a larger group of people (called the “class”) who have the same or similar legal claim. Class action lawsuits are designed to help streamline the legal system by combining tens, hundreds, or even thousands, of individual lawsuits into a single coordinated legal action. In reality, when a consumer who is dissatisfied with a product, he or she does not run to a lawyer. Usually the lawyers find a “class representative,” a person to use as a placeholder for a class-action lawsuit. Law firms, trying for a windfall in huge fees, do research to identify a suitable target company, write a lawsuit against that defendant – without that company knowing anything about it, and then find a “lead” plaintiff to represent the class of “victims.”
Federal judges have complete discretion about whether to certify a lawsuit as a class action lawsuit, and also to fix lawyers’ fee. Once certified as a federal class action, an otherwise small lawsuit turns into a massive cash drain for the target company and a money machine for the lawyers. The real goal of many of these lawsuits is to extract a large attorney fee for the law firm bringing the case. Once the case is in place and filed in court, the lawyers pressure the target defendant company by demanding all sorts of information, and thus “encouraging” it to settle out-of-court. Then they negotiate a token compensation for the users of the product, plus a large attorney’s fee, which is in essence a payoff to drop the matter. The members of the class (the consumers) who bought the product may get a few dollars apiece, or a coupon for some more of the offending items, along with a cumbersome process to obtain their meager winnings, by submitting proofs of purchase.

Tyre industry and lawsuits

No manufacturer or retailer is immune, and the tyre segment is no exception! Recently, Michelin North America has been named in a class action lawsuit for misrepresenting tread depth on some tyres, as was reported by gotaclassaction.com . New tyres used on passenger cars typically start with between 9/32″ to 11/32″ of original tread depth, depending on vehicle model. Tread depth for the tyres at issue in this lawsuit are alleged to be consistently at least 1/32” less than the tread depth represented by Defendant Michelin in its Specification Documents. Because of that, Plaintiff and Class Members allege that they have received approximately 10% to 12.5% less tread depth and usable tread, and therefore an equivalent reduction in tyre mileage, use, and value compared to the same tyre with tread depth as actually represented by Defendant.
In a class action case against Continental Tire North America in December 2006, a plaintiff alleged that Continental distributed a specific type of tyre with the knowledge that it would wear prematurely, and the action affected thousands of people across the United States. According to a report on www.floridatirelawyer.com, an agreement was reached between the plaintiffs and the defendants, pursuant to which Continental was ordered to pay between $5 million and $8 million to settle the case in the District of New Jersey.
Even tyre retailers and service centers are not immune from this! In August 2016, a New York law firm filed a class action lawsuit against Belle Tire Distributors Inc, claiming that the tyre dealer deceptively told customers that they had to buy more tyres than they needed to avoid their car warranties from being voided. As reported by media, the lawsuit lists six counts against Belle Tire including common law fraud, negligent misrepresentation, unjust enrichment and violation of the Consumer Protection act. The suit seeks compensatory & punitive damages, the amount by which Belle Tire enriched itself, and of course, attorney’s fees, experts’ fees and court costs!
Feeding the frenzy of these lawsuits is that the suing lawyers know that most cases are going to be settled instead of prosecuted in a court. Settlement, as opposed to a prolonged legal battle, is often preferred, especially by large corporations. The suing lawyers and their clients get rewarded right away, and limit legal costs and negative publicity for the defendant.
In the well-publicized tyre defect case involving Ford’s Explorer SUV and Bridgestone/Firestone tyres, Ford chose to aggressively settle the numerous cases. The then Ford President Jacques Nasser said that settling the cases is usually the best option for Ford and plaintiffs. “If we can reach a compromise, a fair compromise with our customers where they have some certainty and peace of mind, that to us is much better situation than going into a prolonged legal battle. You’d like to get it behind you and that’s what we would like to do,” Nasser said.
And that sentiment suits the suing lawyers just fine!